The scope of reassessment under Section 147 of the Income-tax Act, 1961, includes the power to recompute the business income of the assessee, where a part of the assessable business income has escaped assessment.

( 1 ) IN this reference under Section 256 (1) of the Income-tax Act, 1961, we are concerned with the following question of law :" Whether, on the facts and in the circumstances of the case and on a proper construction of sections 147 and 148 of the Income-tax Act, 1961, the Income-tax Officer was entitled to recompute the business income of the assessee, the reassessment proceedings having been validly initiated to include property income that had escaped assessment ? "

( 2 ) THE statement of the case relates to the assessment years 1959-60 and 1960-61. The assessees' income from house property was determined at Rs. 1,243 and Rs. 1,159, respectively, in these two assessment years by the previous tax officer and with regard to the assessees' income from business, in view of the profit-sharing agreement between the assessees and their employees, it was determined at Rs. 8,139 for the assessment year 1959-60 and out of Rs. 25,045 it was determined at Rs. 12,522 for the assessment year 1960-61.

( 3 ) SUBSEQUENTLY, and before the expiry of 4 years, another tax officer came to know that the assessees had a house at Ghandernagore and its income had escaped assessment. Accordingly, he started the reassessment proceedings for these two years under Section 147 (b) of the Act after serving the statutory notice on the assessees. There is no dispute that the income from this property has escaped assessment in the original assessments and the reassessment proceedings are validly initiated.

( 4 ) THE tax officer not only included the escaped income of the said property but also recomputed the business income of the assessees for these two years. For the assessment year 1959-60, he enhanced the business income by adopting a "different line of computation from the previous tax officer, and in the reassessment proceedings for the assessment year 1960-61, as he found from the records that the assesses were erroneously under-assessed with regard to income from business, he recomputed the said income again.

( 5 ) ON appeal by the assessees, the Appellate Assistant Commissioner also found that the assessees were erroneously under-assessed in business income for the assessment year 1960-61, for the previous tax officer had erroneously assumed Rs. 20,745 as the assessees' business profit instead of Rs. 41,489 as shown by the assessees. The Appellate Assistant Commissioner has, however, held that the subsequent tax officer has no jurisdiction to reassess the business income for those two years under Section 147 (b) of the Act and he directed the tax officer to rectify the mistake in accordance with the law.

( 6 ) THE Tribunal has dismissed the appeal filed by the revenue by accepting the reasons of the Appellate Assistant Commissioner including the facts found by him.

( 7 ) THE submissions of Mr. Sen, the learned counsel for the revenue, before us are as follows: The original assessments were automatically set aside by the issuance of those notices for reassessment; reassessment is a fresh assessment and, therefore, the subsequent tax officer is entitled to reassess the business income for these two years ; and the jurisdiction of the tax officer under Section 147 (b) of the Act is not confined to the grounds stated in the notice, under Section 148 of the Act.

( 8 ) IN support of his above submissions Mr. Sen cited the decision of the Supreme Court in the the case of F. Jaganmohan Rao v. Commissioner of Income-tax. In that case, the assessee purchased a spinning mill at the time when a dispute was going on between the vendor and his two sons which was the subject-matter of a suit before the learned district judge. In that suit, the sons, inter alia, claimed that the spinning mill belonged to the joint family and they had 2/3rds share in it. During the pendency of that suit the assessee filed the return of his income in which he did not disclose his income from the said mill. The suit was decreed in favour of the sons, but it was reverse